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Monday, July 21, 2014

Are Labor Markets Exploitative?

Here's a vivid description from a newspaper article about 150 years ago of why competitive labor markets are necessarily exploitative and immoral.

Where all men are equals, all must be competitors, rivals, enemies, in the struggle for life, trying each to get the better of the other. The rich cheapen the wages of the poor; the poor take advantage of the scarcity of labor, and charge exorbitant prices for their work; or, when labour is abundant, underbid and strangle each other in the effort to gain employment. Where any man engaged in business in free society to act upon the principle of the Golden Rule--doing unto others as he would that they should do unto him--his certain ruin would be the consequence.

Especially if you are predisposed to feel some sympathy with this line of argument, you will be intrigued to know that it's from a pro-slavery essay that appeared in the Richmond (Virginia) Examiner, July 17, 1861, as quoted in Fighting Words, a 2004 book by Andrew S. Coopersmith (pp. 49-50). Here's the full passage:

Christian morality is impractical in free society and is the natural morality of slave society. Where all men are equals, all must be competitors, rivals, enemies, in the struggle for life, trying each to get the better of the other. The rich cheapen the wages of the poor; the poor take advantage of the scarcity of labor, and charge exorbitant prices for their work; or, when labour is abundant, underbid and strangle each other in the effort to gain employment. Where any man engaged in business in free society to act upon the principle of the Golden Rule--doing unto others as he would that they should do unto him--his certain ruin would be the consequence.

"Every man for himself'" is the necessary morality of such society, and that is the negation of Christian morality. . . On the other hand, in slave society, . . .it is in general, easy and profitable to do unto others as we would that they should to unto us. There is no competition, no clashing of interests within the family circle, composed of parents, master, husband, children and slaves. . . . When the master punishes his child or his slave for misconduct he obeys the golden rule just as strictly as when he feeds and clothes them. Were the parent to set his chidden free at fifteen years of age to get their living in the world, he would be guilty of crime; and as negroes never become more provident or intellectual than white children of fifteen, it is equally criminal to emancipate them. We are obeying the golden rule in retaining them in bondage, taking care of them in health and sickness, in old age and infancy, and in compelling them to labor. . . .

'Tis the interest of masters to take good care of their slaves, and not cheat them out of their wages, as Northern bosses cheat and drive free labourers. Slaves are most profitable when best treated., free labourers most profitable when worst treated and most defrauded. Hence the relation of the master and slave is a kindly and Christian one; that of free laborer and employer a selfish and inimical one. It is in the interest of the slave to fulfill his duties to his master; for he thereby elicits his attachment, and the better enables him to provide for his (the slave's) wants. Study and analyze as long as [you] please the relations of men . . . in a slave society, and they will be found to be Christian, humane and affectionate, whilst those of free society are anti-Christian, competitive and antagonistic.

Of course, the fact that a point of view has some appalling allies doesn't make it incorrect. Most points of view, from all perspectives, have some appalling allies. So the fact that slaveholders saw wage labor as exploitative and slavery as moral certainly doesn't prove that wage labor is not exploitative, at least at certain times and places and situations. But it does suggest that before you condemn labor markets as exploitative--especially labor markets that operate in modern high-income societies with democratic governance--you should consider the alternative social mechanisms over time that determined what jobs people would do and how much they would be paid.

My own views about the value of labor market are closer to those expressed by Nobel laureate Edmund Phelps in an interview with Howard R. Vane and Chris Mulhearn published in 2009 in the Journal of Economic Perspectives. Phelps said:

I’ve been trying to develop a new justification for capitalism, at least I think it’s new, in which I say that if we’re going to have any possibility of intellectual development we’re going to have to have jobs offering stimulating and challenging opportunities for problem solving, discovery, exploration, and so on. And capitalism, like it or not, has so far been an extraordinary engine for generating creative workplaces in which that sort of personal growth and personal development is possible; perhaps not for everybody but for an appreciable number of people, so if you think that it’s a human right to have that kind of a life, then you have on the face of it a justification for capitalism. There has to be something pretty powerful to overturn or override that.

The questions about when, where, and how paid labor markets can be said to be exploitative aren't going to be settled in a blog post. For a quick sketch of some of the arguments about about how working for wages is either an instrumental act divorced from morality or part of a deeper moral engagement with society and nature, my essay on "Economics and Morality" in the June 2014 issue of Finance and Development offers a starting point.

Note: Thanks to Ann Norman, the Assistant Editor and my general co-conspirator at the Journal of Economic Perspectives, for pointing out the slavery quotation.